Economic Update – Euro Zone Inflation over 2%, Weidmann Comments, More Fed Rate Chatter…

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Market Watch: Eurozone inflation hits 2%, rises above ECB target

  • The annual rate of inflation in the eurozone rose above the European Central Bank’s target for the first time in four years during February, driven higher by another rise in energy prices.
  • The European Union’s statistics agency Thursday said consumer prices were 2.0% higher in February than a year earlier, the highest rate of inflation since January 2013 and a pickup from 1.8% in January 2017.
  • However, that acceleration was mostly down to a 9.2% rise in energy and a 5.2% rise in food prices over the year. The core measure of inflation–which strips out items such as energy and food–was unchanged at 0.9%, while prices of manufactured goods rose at a slower pace than in January.

Reuters: Euro zone 2017 inflation likely to be far higher than projected: Bundesbank’s Weidmann

  • Euro zone inflation is likely to be sharply higher in 2017 than projected but will still dip towards the end of the year, Bundesbank president Jens Weidmann said on Wednesday, arguing that accommodative monetary policy remains appropriate.
  • “Monetary policy has to avoid the markets’ perception that the central bank is only willing to counter downward pressure on financial markets with an accommodative policy stance but refrains from tightening the reins in times of higher price stability risks due to the fear of triggering market turbulences,” he said.

Market Watch: Fed’s Brainard says economy can handle an interest-rate hike ‘soon’

  • The U.S. economy appears to be in transition to a more stable growth path and gradual interest-rate hikes are likely to be appropriate “soon,” said Federal Reserve Gov. Lael Brainard on Wednesday.
  • “We are closing in on full employment, inflation is moving gradually toward our target, foreign growth is on more solid footing, and risks to the outlook are as close to balanced as they have been in some time,” Brainard said in a speech to the John F. Kennedy School of Government at Harvard University.
  • Brainard had been reluctant to raise interest rates, saying that there were risks to the U.S. economy from weak global growth. But now, “near-term risks” to the U.S. from abroad appear to have diminished, Brainard said.
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